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Treasury Technology Marches Forward

Technology moves in one direction: forward. These days, the advances in treasury technology include providing companies with strategic insights, embracing big data and the cloud, and making it easier for companies to handle everything from payments to bank account management.

Joe Siu, director of financial risk management for Chatham Financial in Kennett Square, Pa., says the goals of treasury technology have changed. “The innovations now are more about how functionality is delivered instead of what is delivered,” Siu says.

While the past decade has been dominated by a drive for efficiency and automation, the next decade “will have more to do with delivering strategic insight and improving competitiveness,” he predicts. A company with sophisticated currency risk management, for example, might be able to win more business by selling in a different currency than its competitors.

While much treasury functionality may be technologically mature, breakthroughs are changing database infrastructure and making data mining and searches faster and more robust, reports Craig Himmelberger, director of ERP financial solutions marketing at SAP. “Technology is moving away from relational databases to in-memory databases. It’s possible with today’s power and economy to build a data array on RAM chips and get near-instant responses.”

And that empowers mobile technology. “A treasurer sitting in an airport can do complex, data-intensive numbers crunching in seconds, much faster than he or she could at a desktop querying a traditional relational database,” says Himmelberger, pictured at left. “Running what-if scenarios on a mobile that would have been impossible in the past can now be done relatively easily.”

Another innovation is sophisticated dashboards, coming next year, that can reach into multiple databases to provide customized snapshots of just what financial staffs need to see, reports Cindy Murray, head of global treasury product infrastructure, platforms and ecommerce at Bank of America Merrill Lynch. One enabler will be the adoption of the Balance and Transaction Reporting Standard (BTRS), a successor to traditional BAI standards, Murray explains. Banks are positioning their reporting for the 2013 adoption of BTRS.

And more aggregation services are coming. “We aggregated payments in payment hubs. Now we’ll aggregate information and data-based reporting,” says Tom Durkin, Bank of America’s global head of integrated channel solutions. “Users won’t have to go to the specific applications to get the data.”

Another 2013 development should be the linking of FX to payments. “You’ll be able to go into a payment application, create a contract for a currency and draw down against that contract as you make payments in that currency,” Murray explains. “The traditional FX app will be more tightly bound to client workflow around cross-border payments.”

Paying via Shared Service Centers

One can see the next generation of treasury technology in shared service centers that pay on behalf of any number of legal entities and soon will be receiving payments as well, says Arthur Brieske, head of product management for the Americas in global transaction banking at Deutsche Bank.

A numbering scheme can be the key to automatic application and reconciliation. “We can assign unique account numbers to our clients’ vendors and customers,” explains Brieske, pictured at right. “They may view it as simply their vendor number, but when they populate the reference field to pay or get paid, they are providing everything their bank needs for auto-reconciliation for ACH and wire payments.”

“That creates a 100% hit rate,” he says. “We know from the number structure to which paying or receiving entity it belongs.”

Making cross-border ACH payments is also about to get easier, based on the fairly new International ACH Transactions (IAT) standard entry class codes. “If we receive payment files that conform to IAT, a company can open one account in any country in any currency and make ACH payments anywhere,” Brieske reports.

Dan Gill, product line director for corporate solutions at Open Solutions, says the next generation of bank account analysis technology is ready to take off. “The final release of the ISO-certified bank service billing statement will bring a rapid uptake, especially among companies with multiple European banks,” Gill says, noting that 18 banks already are issuing such statements.

He also predicts growing traction for electronic bank account management (eBAM). “The SWIFT message format is now ISO-certified,” Gill says. “All the pieces are in place.” Watch for a live pilot by UnitedHealth Group, using Open Solutions, J.P. Morgan and Bank of America Merrill Lynch, he suggests.

Ed Barrie, head of treasury operations and global foreign exchange at $2.4 billion Itron in Liberty Lake, Wash., says the biggest technological innovations are eBAM and digital signatures. Adoption has been slowed by the ingrained business and regulatory practices of banks, despite pressure to move forward from corporate champions like General Electric and Microsoft, Barrie notes.

Cloud Migration

“The days of thick client software are fading,” notes Paul Bramwell, senior vice president for treasury solutions at technology vendor SunGard, pictured at right. “More functionality is migrating to thin-client applications. Treasury staffs like the cloud because it frees them from depending on IT for help, but data security concerns make them happier with a private cloud than the public cloud.”

The “cloud” is a way of saying that, as long as it’s secure, a software application’s physical location has ceased to matter. Even in the ERP world, “many companies are moving away from installed on-site software,” SAP’s Himmelberger notes. For on-site installations, it’s becoming popular in the corporate world to install systems in a shared-services center, he adds.

Another 2013 development should be the linking of FX to payments. “You’ll be able to go into a payment application, create a contract for a currency and draw down against that contract as you make payments in that currency,” explains BofA's Murray. “The traditional FX app will be more tightly bound to client workflow around cross-border payments.” BofA Merrill plans to launch such a product next year, she says.

When it comes to treasuries’ investments, nirvana—a single comprehensive view of all holdings, including those held by investment managers and funds, that’s available 24/7 with just one log-in and is reconciled daily—is already available and being used today, reports Scott Erickson, director of product management at Clearwater Analytics in Boise, Idaho.

Such consolidated visibility will become a standard risk management best practice, Erickson predicts. “There are times when a significant event happens and the CFO calls the treasurer to ask what the company’s total exposure is to a particular issuer, industry or market segment. Sometimes the treasurer has to say, ‘I don’t know, and it will take time to find out.’ That response is becoming unacceptable.”

Such visibility is not new for Clearwater clients—some have been using it since 2003. What’s new is customized reporting. “Everyone wants visibility into their investments, but they view the investment world through different lenses,” Erickson notes.

Clearwater bills itself as the ultimate aggregator and reporter of investment data, and doesn’t promote its integration with other aggregators into comprehensive dashboards that go beyond investment holdings. “We provide the dashboard,” Erickson insists. But Clearwater does integrate with ERP systems to allow “investment data to flow seamlessly to create GL entries.”

Single System versus Best of Breed

The debate continues over which is better—a single comprehensive, integrated system or a bunch of best-in-class niche applications wired together. For workstation provider Kyriba, success comes from adding modules and functionality but also from the ability to integrate easily with other financial systems.

“Treasury can’t be an island,” says Robert Stark, vice president of marketing at Kyriba. “Integration with things like the GL were always important, but that has evolved into more interoperability as treasury staffs expect to buy best-of-breed solutions and have them all work together smoothly.

“There is a thirst for the best technology, and no one vendor can be the best in every area,” Stark explains. “There are a host of niche players that excel in their chosen niches. A lot of our users want Kyriba to work with 360T or FiREapps, or with SWIFT for eBAM. Some companies will always want to use a single platform, but the use of specialty applications and the demand for smooth integration are growing.”

While Himmelberger thinks SAP users don’t need a treasury workstation or other back-end reconciliation and reporting systems, he concedes that trading systems may be necessary to supplement SAP.

“We aren’t trading systems experts. That’s not our game,” he says. “We’re a system of record and expert at the back-end accounting, starting with deal capture. We’re happy to have partners do the trading and plug into SAP” for the rest of the accounting and reporting.

The old combo of an ERP system linked to a treasury management system still works for many shops. Houston-based BMC Software bought an IT2 workstation in 2008 as its first comprehensive treasury system.

“We were efficient before, and we had a variety of solutions, some of them homegrown, that were working,” reports BMC Treasurer Corey Walsh. “But IT2 tied all those activities together with greater automation.” Cash forecasts, for example, are now much quicker and easier to compile, explains Walsh, pictured at left. The treasury system and BMC’s Oracle ERP system pass secure files back and forth automatically.

BMC, with annual revenue of more than $2 billion, does connect IT2 with niche services to get FX market rates, do FX trading online, have FX trades matched and communicate with its custodian about investment matters, Walsh reports. Instead of using portal-based bank technology, BMC uses SWIFT for Corporates to send payment files and receive bank statements.

In addition to mobile access, banks are concentrating on intelligent reporting informed by data aggregation. When a bank can capture all of a company’s inbound and outbound payments and collect all the data on a single platform, the bank is in a good position to apply performance metrics and show the company how well it collects and disburses, notes Jeff Ficke, senior vice president and director of treasury management at Fifth Third Bank in Cincinnati.

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